Simpson & The Bailout, Redux: Why Risk So Much for So Little?

UPDATE: On Monday, Oct. 27, we heard back from Simpson Thacher, which issued the following statement:

Simpson Thacher is pleased to be assisting the U.S. Department of the Treasury in implementing the government’s Capital Purchase Program under the Emergency Economic Stabilization Act. . . . Simpson Thacher is advising Treasury on the development and implementation of the program, including drafting standard form documentation to be used by all participating banks. . . . Our billing arrangements with Treasury, as with all of our clients, are confidential, but reflect the public service nature of this engagement.

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When, earlier this week, we posted our guesstimations on Simpson Thacher’s hourly rates for the firm’s bailout work, some Law Blog commenters expressed surprise that Simpson would risk so much for so little. Just $300,000? What about all the conflicts the work could create?

Luckily for us, BusinessWeek tackles that very issue in this story. Simpson, writes BizWeek, has had dealings with banks that either played a role in the financial crisis or will be receiving capital injections, from Lehman to WaMu. So with crummy pay and the potential for major headaches, why would Wall Street firms like Simpson seek bailout work? One possible answer: reputation.

As the firm that Treasury turned to at a critical time, argues BizWeek, Simpson will see its reputation blossom. That, along with the expertise it gains working on the bailout, will be a boon in recruiting future clients. One source familiar with the firm’s Treasury contract told, “It’s good for the country, it’s good for business, it’s good for the profile.”

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